Guarding Privacy Can Boost Business

Why has privacy become such a big issue? It’s because since the Internet became a mass medium, our world has become a perpetual public relations spin. As a result, everything gets blown out of proportion.

For years, traditional businesses have worked every day to improve their methods of reaching a target audience. The direct marketing industry is built on fields of data about people. Other than the very few who write to the Direct Marketing Association to be de-listed, most consumers don’t bother to question these tactics, never mind opting out.

We’re used to it, and the marketers don’t make a fuss about it. They try to hit us with the right product pitches so they make more money and, ironically, provide a service to us.

Millions of consumers live it, experience it and are either delighted with an offer or are irritated with junk mail. It’s all about relevancy. I don’t mind that Victoria’s Secret knows my bra size – you can’t get more personal than that! They also tell me what size Miracle Bra would work wonders on me, and I like that.

But online is a different world, with different rules. Online companies are judged (until now) by their noise levels. No respectable online business does things quietly, because the more buzz a business generates, the more the stock market values it. E-marketers and technology companies alike have been touting their unique ability to target customers down to the individual level, hence making marketing efficient and highly effective. Is there anything wrong with this? Not really, except that during this Internet frenzy, your average consumer has become a stockholder in all these buzzed companies and reads the Industry Standard and Red Herring.

And consumers got worried because they saw thousands of companies coming after them for one purpose – to get their personal information. In a recent poll, 84 percent of Internet users claimed to be concerned about businesses getting their personal data, though, interestingly, 54 percent of consumers have willingly provided such data to use a Web site. In addition, 24 percent of users give Web site owners false personal information in order to protect their online privacy.

All this noise helped the formation of the Network Advertising Initiative, a self-regulated industry consortium of major Internet advertising companies, to act as third-party monitors of industry conduct. The NAI has set out to collectively address consumer privacy concerns and to propose a self-regulatory plan for the industry, as well as to educate the public on the misconceptions regarding online privacy. Recently, the Federal Trade Commission unanimously endorsed the self-regulatory plan drafted by the NAI. Even though this does not yet carry the force of law, it is good practice that you understand what the regulation means and prepare to comply.

There are five main points to the plan; the first two are arguably the most critical.

Notice. Network advertisers would post “clear and conspicuous notice” on host Web sites, i.e., those sites that contain advertisements, whenever tracking is done. When the information collected may be linked with personal data, “robust” notice must be provided.

This means network advertisers will need to disclose to consumers when they are gathering profiling data as well as personally identifiable information. The “clear and conspicuous notice” will contain several components, including at least profiling activities undertaken by the network advertiser; what types of information are collected; whether information will be transferred to third parties; procedures for consenting to such data use; and the length of time the data will be held by the network advertiser.

When anonymous profiling data are combined with personally identifying information, a “robust” notice requires the “clear and conspicuous notice” of above as well as how the combined anonymous/personal profile information would be used as a result of such a merger.

Choice. Once informed about the network advertiser’s information-collection practices, consumers should be able to decide whether to participate in profiling.

This means once notice has been posted, the choice to participate is asked of the consumer. On sites where multiple network advertising companies collect nonpersonally identifiable information, consumers need to be able to opt out of profiling by any or all of the network advertisers on a single page. Consumers would need to opt in when an e-marketer chooses to combine anonymous information with personally identifiable information. Finally, a “robust” opt-out mechanism should be available to consumers who do not want their personally identifiable information linked to profiles in the future.

Access. Network advertisers would provide reasonable access to personally identifiable information.

The NAI requires that network advertisers provide consumers access to their personal data as well as to other information that is associated with personally identifiable information. This said, the NAI thinks that access could present implementation issues that require consideration before its parameters can be defined.

Security. Network advertisers shall provide a reasonable amount of security for storing data collected for profiling purposes.

Network advertisers should be subject to the same reasonable standards as all businesses that operate on the Internet.

Enforcement. Network advertisers would work with a third-party enforcement program, such as a seal program, or as an alternative, submit to independent auditors for examination.

Under the NAI principles, network advertisers have committed to monitoring and enforcement by an independent third party such as TRUSTe and BBBOnline. Noncompliance would result in the public reporting of violations or referral to the FTC.

With compliance, you can expect that many consumers will opt out of having personally identifiable information collected about them. So how will that affect your marketing initiatives, which until now have relied upon having this type of information? The good news is that demographic and personal data are not the holy grail in e-marketing.

Targeting methods based on this type of information are quite limiting. Never mind the proliferation of false data – it’s ineffective because it provides no insight into an individual consumer’s unique tastes and preferences. People with the same demographics or psychographics do not necessarily like the same things.

E-marketers are discovering new targeting techniques based on implicit data such as anonymous online behavior. They are using technologies such as collaborative filtering to anticipate what someone is likely to purchase based on his behavior pattern rather than on who he is.

These techniques are much more reliable and accurate in reaching qualified customers because they pinpoint products and services based on customers’ tastes and preferences, without requiring any personally identifying information.

Lixuan An is president of, New York, a technology company providing turnkey personalization services to e-businesses.

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